Treasury secretary Scott Bessent explained the market’s recent volatility this morning:

“The market and the economy have just become hooked, and we’ve become addicted to this government spending,” Bessent said. “There’s going to be a detox period.”

Thank goodness. We were worried it had something to do with the general chaos emanating from Washington: weakening economic conditions amidst high inflation (aka stagflation), the on again/off again tariffs, and the absolute cratering of America’s global reputation.

The futures were all over the map following this morning’s nonfarm payroll report. The unemployment rate ticked higher, even though the government layoffs haven’t even registered yet.

continued for members…

Stocks are trying to hold this support. If you looked only at VIX, you might believe they will. Other factors…not so much.

Currencies suggest there’s perhaps more equity downside ahead. CL and RB are finally getting a bounce from USD weakness. It’ll be important to watch, as any sustained rise will further complicate the inflation picture.

It’s hard to predict how accommodative OPEC+ will be. But, our interest rate cycle model suggests the 10Y will decline substantially by early 2026. Stagflation could certainly do that. In the meantime, however, the 10Y will have to deal with the rising red channel.

I suspect that’ll happen in the next month or so. Though, it’s hard to predict when Trump will cave under Wall Street pressure and ditch anything that might contribute to stagflation.

GLTA